Contractors CIS question

Lifeisbutadream

Bean_Counter wrote: »

I see your point, but unfortunately that is not my understanding of the way that HMRC view it. They view it as the rules are there to be obeyed and tax should be accounted for accordingly.

One specific example of their logic behind this in a case where some treated an employee as self-employed and failed to deduct PAYE, HMRC did not give any credit for the tax that they person had already paid in his self-employed capacity (Demibourne Ltd v HMRC, Special Commisioner UKSPC 23.6.05, for anyone interested.)

The moral being, don't necessarily expect logic to apply.

However, on the more positive side if you approach HMRC rather than them discovering you, then they will usually work with you rather than be all draconian from the start.

Wait and see what your accountant advises when they return from their holidays.

How can I read about the example you gave? will there be any documentation about it?

I would be seriously concerned if we were classed as an employee - we pay 'on a price' - i.e. if the labour for something was £100 and both OH and subbie did it, subbie would get £40, irrelevant of whether it took 5 minutes or 5 weeks. If we were an employee, surely we would have to pay holidays and sick etc. how on earth could we afford that?

Are they going to do us for not paying the minimum wage next? they laid a floor a couple of weeks ago which was seriously underquoted. Our subbie got £40 and it took a day and a half!

Bean_Counter

Lifeisbutadream wrote: »

How can I read about the example you gave? will there be any documentation about it?

I would be seriously concerned if we were classed as an employee - we pay 'on a price' - i.e. if the labour for something was £100 and both OH and subbie did it, subbie would get £40, irrelevant of whether it took 5 minutes or 5 weeks. If we were an employee, surely we would have to pay holidays and sick etc. how on earth could we afford that?

Are they going to do us for not paying the minimum wage next? they laid a floor a couple of weeks ago which was seriously underquoted. Our subbie got £40 and it took a day and a half!

Minimum wage doesn't apply to this example if you are self employed, as far as I am aware.

I am not trying to panic you, but there is a lot to it. All part of the transformation from subbie to contractor!

Going forward is quite straight forward and you are doing the right thing because you have registered for CIS. Dealing with the history is more difficult. This is where your accountant should come into their own and provide good advice.

Lifeisbutadream

Bean_Counter wrote: »

Minimum wage doesn't apply to this example if you are self employed, as far as I am aware.

The minimum wage definately doesnt apply when you are self-employed, but I was worried about if they decided we were 'employing' one of our subbies.

I am trying not to get worried, but it does upset me a little bit when I think of how hard OH works for very little return and then they may try and take even more!

Bean_Counter

Lifeisbutadream wrote: »

I am trying not to get worried, but it does upset me a little bit when I think of how hard OH works for very little return and then they may try and take even more!

Indeed try not to worry. I've crossed swords with HMRC a few times and always found them OK to deal with. At the end of the day I'm sure your accountant can sort something out.

At the end of the day, all you really have to do is apply the tax rules. Easier said than done I know. HMRC are not looking to penalise or persecute anyone, just make sure that the rules are followed.

As you alluded to in a previous post, yes you are acting as an unpaid tax collector. Just like PAYE, VAT, CSA etc etc etc. Extra admin yes, but I've always found them fair.

Lifeisbutadream

Bean_Counter wrote: »

Indeed try not to worry. I've crossed swords with HMRC a few times and always found them OK to deal with. At the end of the day I'm sure your accountant can sort something out.

At the end of the day, all you really have to do is apply the tax rules. Easier said than done I know. HMRC are not looking to penalise or persecute anyone, just make sure that the rules are followed.

As you alluded to in a previous post, yes you are acting as an unpaid tax collector. Just like PAYE, VAT, CSA etc etc etc. Extra admin yes, but I've always found them fair.

Thanks for all your help Bean Counter, I really do appreciate you taking the time to reply after letting me rant on...

Lifeisbutadream

OK bit of an update on this.

I registered as a contractor. Spent the whole of the weekend and this week reading up and finding out what to do. have set up forms for all sub contractors to fill in, set up systems on excel to tie in with my accounts and invoice payments. Set up statements with pre-populated parts to give to the sub-contractors. Made one payment properly to our regular subbie and was waiting for details from other subbies so I could verify them.

Got details from one plumber this morning. rang up and they said he wasnt verified, so I rang the plumber and he got really mad with me, saying that he was in no way part of the CIS and that I was messing him about and should just pay him. I offered to send back his invoice so that he could invoice the customer direct (this not only breaks the 'package' the customer has bought - i.e. an entire kitchen from us, but it has also lost us £50 profit).

I range CIS helpline just to justify to myself that the plumber was part of the CIS and the girl I spoke to told me that I did not need to be part of the CIS as we just did domestic work, she went on to say that it was only large companies that needed to registered as a contractor and thta I did not need to do anything. I asked her over and over to repeat and she told me again and again that I didnt need to.

I was understandably upset that I had spent so long sorting this out and fallen out with the plumber, but warning bells were going off so I rung CIS helpline back. The person I spoke to this time confirmed that yes I should be in the scheme. This person told me that some jobs did not have to go through the scheme - he then proceeded to list them - replaced cables not new for electricians, new pipework for plumbing. the list went on. I dont have a clue how you would make this work in practice, so still dont fully know what to do!

Now, I may be speaking out of turn here, but is this not complicated enough without the helpline giving you the wrong information? how do I know what is the right information? do they just make it up as they go along?

Bean_Counter

Lifeisbutadream wrote: »

Now, I may be speaking out of turn here, but is this not complicated enough without the helpline giving you the wrong information? how do I know what is the right information? do they just make it up as they go along?

It is quite a complicated scheme, not helped by seemingly duff information from the helpline. Having said that it is quite a common scheme in that a lot of people use it. Once the scheme is up and running, it is quite easy to administer, albeit it takes a bit of time to do the returns etc.

In one of your previous posts, you said that your accountant was on holiday and you were waiting for their return. Are they back yet? They should be able to give you practical advice on setting up the scheme as they will know your business better than I do or the people at the helpline.

Do you have a copy of CIS340 (I think) booklet from HMRC. In one of the appendices it gives a lot of examples of what is covered by the scheme and what is not and is quite clearly written.

Lifeisbutadream

Hi Bean Counter. My accountant is back from holiday and has assured me that I should not have anything to worry about. He thinks that our main subbie will not be seen as an employee and that the amounts involved are not large enough to be of interest to the HMRC. He also said that any fines would be income based. (we made £16500 profit last year in the partnership, so hardly going 'buying a dessert island amounts!)

I am not worried about all this now, but I am concerned that the HMRC does not know what they are doing! if I had listened to the girl I spoke to last week I would not be using the scheme at all!

Bean_Counter

Lifeisbutadream wrote: »

Hi Bean Counter. My accountant is back from holiday and has assured me that I should not have anything to worry about.

One of the reasons that you pay accountants is to give financial advice, and if you are happy that the advice given is correct, then so be it. They know a lot more about your business and the type of work you do than I do.

The bit about "the amounts involved are not large enough to be of interest to the HMRC" seems a little odd advice to be given, but I dare say may well reflect commercial reality rather than HMRC rules.

Anyway, good luck for the future.

Lifeisbutadream

Bean_Counter wrote: »

One of the reasons that you pay accountants is to give financial advice, and if you are happy that the advice given is correct, then so be it. They know a lot more about your business and the type of work you do than I do.

The bit about "the amounts involved are not large enough to be of interest to the HMRC" seems a little odd advice to be given, but I dare say may well reflect commercial reality rather than HMRC rules.

Anyway, good luck for the future.

I think that he meant that our business was not likely to give the HMRC huges amounts of money. We would basically have to declare ourselves bankrupt if they started chasing us for money because we dont really make much yet.

Thanks - I know it will work out because we seem to get stumbling blocks all the time, but have always got over them.